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September 20, 2011

Made in USA: President Obama and the FTC Chairman Need to Have a Beer Summit

With all of the economic turmoil, there’s been a lot of talk lately about creating more American jobs. Ford has attracted a lot of buzz with an ad featuring an impromptu “press conference” where a real Ford Truck owner was asked whether buying American was important to him which he turns into a statement that he purchased a Ford because they didn’t accept bailout funds.

Last Friday, President Obama signed the America Invents Act which reforms and speeds up the patent process. During the President’s signing speech, he also pushed his jobs creation proposals, which he said would help guarantee that there were American jobs to build newly patented products. Specifically, the President said:

We need to continue to provide incentives and support to make sure the next generation of manufacturing takes root not in China or in Europe, but right here in the United States -- because it’s not enough to invent things here; our workers should also be building the products that are stamped with three proud words: Made in America.

It seems the President needs to invite his FTC Chairman over to the White House for a beer summit. Although, in our experience, the President is not alone in making this mistake (the Ford commercial above may have made it as well), “Made in America” (or “Made in USA”) does not mean, as the President suggests, that a product was manufactured in the United States, but rather that “all or virtually all” of the product is made in the United States. “All or virtually all” is in turn defined as "all significant parts and processing that go into the product must be of US origin. That is, the product should contain no — or negligible — foreign content.” So it’s not enough that the product simply be manufactured in the United States, all or most of its parts and processing must have been made in the United States (and California has its own standard that is arguably even stricter). This is not always an easy standard to meet in today’s global economy, particularly given the fact that foreign parts are sometimes cheaper (or the only source available). We’ve always wondered whether the FTC’s definition reflects more policy than consumer interpretation. We’re not economists, but one has to wonder whether such a strict standard does more harm than good in terms of US jobs, especially when companies can’t apply the same exemption for natural resources not available domestically to parts that are no longer available from US suppliers. And, from a consumer interpretation standpoint, if the POTUS doesn’t understand what the term should mean, it’s no wonder domestic manufacturers get confused as well.

Of course, the FTC’s Made in USA guides allow companies to make qualified claims. Let’s try that out in the President’s speech: "[B]ecause it’s not enough to invent things here; our workers should also be building the products that are stamped with eight proud words: Made in USA of US and imported parts."